something, too: Executive vice president Tom Donilon prepared Michael Dukakis and Bill Clinton for their campaign face-offs, and former general counsel Robert Zoellick prepped George W. Bush for his.

Other political experience counts. Take adviser Bill Maloni, who once lobbied for the Federal Reserve, or senior vice president Chuck Greener, who was communications director of the Republican National Committee. Fannie's board of directors is political by design. The company's charter gives the President the right to appoint five of the board's 18 members. The idea was to ensure that Fannie fulfilled its public mission. Today the five appointees, considered big winners in the capital's game of spoils, promote the interests of Fannie's shareholders. Recent directors include Ann McLaughlin Korologos, Ronald Reagan's Labor secretary; Ken Duberstein, Reagan's chief of staff; Bill Daley, former Commerce Secretary and Gore spokesman during the 2000 election controversy; and Jack Quinn, counsel to Bill Clinton and lawyer to pardoned fugitive Mark Rich.

To support those public faces, Fannie spent more than $6 million last year to influence lawmakers and public officials. That includes the salaries of a sizable in-house staff and retainers paid to many of the city's most prominent law firms and lobbying shops. Fannie's executives often drop the names of various powers that be--a chumminess Ralph Nader says was also true of the savings-and-loan industry before it collapsed.

These politically charged executives, directors, and lobbyists glide into campaign mode whenever Fannie's status is threatened. After the Wall Street Journal criticized the company last spring, Fannie called the editorials a "smear job" and orchestrated protest calls. Top executives Arne Christenson and Chuck Greener--who knew editorial-page editor Paul Gigot from conservative circles--traveled to Manhattan to mend fences.

"After sending around all these nasty letters and launching these incredible missiles, they tried to jolly us, Republican to Republican," says Susan Lee, who wrote the Wall Street Journal editorials.

Christenson started the meeting by passing around old photos of Gigot and himself practicing tricks on the basketball court. The charm offensive didn't work. In June, the Journal's board argued that taking on Fannie and Freddie would be President Bush's biggest challenge after toppling Saddam Hussein.

To court lawmakers, Fannie holds fundraisers and stages public-relations events touting the number of mortgages Fannie has financed in their districts--like General Motors encouraging a senator to brag about how many constituents had bought its cars. Many on the Hill chuckled when Fannie elevated Duane Duncan--the Fannie operative who first called Christopher Shays's office--to lobbyist stardom: Duncan was chief of staff to Representative Richard Baker, Fannie's nemesis in the House.

Not all of Fannie's Lobbyists use a velvet glove. Congressional sources say the company has tried to get unruly Hill staffers fired. And after Baker proposed a stronger regulator for Fannie and Freddie two years ago, Fannie Mae hired a phone bank to call constituents on behalf of the Coalition to Preserve Homeownership, a front for the interests of Fannie, Freddie, real-estate agents, and homebuilders. Some members of Baker's subcommittee were enraged after they received anonymous boxes filled with thousands of letters from constituents protesting a so-called congressional proposal "to raise mortgage costs."

Fannie is adept at trying to smooth over such misunderstandings. On a single day in mid-October 2000, 11 of its employees, including Raines and other top officials, wrote checks for campaign contributions to Democrat Ken Bentsen of Texas, a key member of Baker's subcommittee. A week before, 14 employees contributed to the campaign of Virginia's Chuck Robb, then on the Senate Banking Committee. And to keep the two parties in line, Fannie donated $1 million during the 2000 cycle and another $1 million for the 2002 cycle. That puts Fannie among the top ten corporate donors of so-called "soft" money, just after Microsoft.

Says Charles Lewis, executive director of the DC-based watchdog group the Center for Public Integrity: "Here you have an entity given extraordinary largess that throws around tons of money to maintain its cushy situation."

Also disconcerting, some say, is Fannie's nationwide network of "partnership offices." The official line is that the local offices allow experimentation with innovative mortgage products, but a Fannie executive once admitted that the offices were a cheap way to expand Fannie's political base. One of the first offices was in San Antonio--home to the late Democratic Representative Henry Gonzales, then chair of the House Banking Committee.

Controversy surrounds the Fannie Mae Foundation as well. It gives out more affordable-housing grants than anyone else in the country, provides millions to DC advocacy groups and cultural institutions like the Kennedy Center and Arena Stage, and sponsors the Help the Homeless walkathon and other charitable ventures.

The foundation also helps Fannie Mae fight its adversaries. Although foundation CEO Stacey Davis claims that a "Chinese wall" separates the foundation from Fannie's corporate interests, housing advocates and other critics accuse Fannie Mae of using the foundation's grant money as a weapon.

"It's grant payola," says Nader. "Fannie sprinkles millions around the District and then calls on those groups when the company needs to neutralize dissent."

After Shays and Markey introduced their bill, grant recipients such as the National Urban League and the National Council of La Raza, which advocates for Hispanic-Americans, took a sudden interest in SEC disclosure rules and wrote to support the bill's defeat.

John Taylor, president of the National Community Reinvestment Coalition, an umbrella group for more than 800 neighborhood organizations, says the foundation took away a $65,000 grant after he complained about Fannie's poor record on affordable housing. (Fannie later reinstated the funding.) Reverend Graylan S. Hagler, pastor of DC's Plymouth Congregational United Church of Christ, told Congress that after he challenged Fannie about its zero-down lending policy, the foundation canceled an $80,000 grant to a nonprofit housing group he supported. He picketed Fannie's headquarters and its annual meeting in Texas in response.

A St. Petersburg Times study found that the foundation's grant-giving favors groups affiliated with Fannie's executives or in the districts of powerful politicians. Fannie denies that the foundation is a lobbying arm.

"Fannie Mae is a bit like the tobacco industry," Charles Lewis says. "They use the foundation to try to put a happy face on what they do. The whole thing is part of a perpetual boondoggle so they maximize public risk and private gain."

Thumb through Fannie's press over the years and you'll find lots of predictions that the company's critics are poised to force change. Although that's as unlikely now as in the past, Fannie has alienated many public officials who say they're increasingly skeptical of what they consider the company's sloganeering and political subterfuge.

Peter Wallison of the American Enterprise Institute thinks the government should be fighting Fannie and Freddie's monopoly power just as it went after Microsoft's. Wallison claims "it's hard to know whether the government controls Fannie and Freddie or they control the government." Some say the two companies treat OFHEO, the agency that monitors them, like a lap dog.

Fannie's increasing size and debt also worry regulators. Says one top official: "Every financial institution this leveraged has gotten into trouble. The question is not whether we should do something about Fannie and Freddie, but when."

NYU's Lawrence White argues that Fannie and Freddie no longer need a subsidy: "It's time to say, 'Thanks, guys, you've done well, but now you can go home and swim like everyone else.' "

White thinks Fannie and Freddie could build on their expertise and reputation to continue financing mortgages--but in a free market. In their place, he says, the government could tailor a far more efficient program to help low-income people buy homes.

Critics ranging from libertarians to Ralph Nader have also endorsed full privatization, though Fannie executives dismiss them as "existentialists" and "ideologues." Others have proposed keeping Fannie and Freddie out of the upper-middle-class market, curbing their subsidized borrowing, and ratcheting up the help they must provide to poor and minority homebuyers.

One voice the company can't ignore is that of Wall Street. A mortgage-industry analyst complains that because of "the perception of Fannie Mae's political risk," those who bought the company's stock in the past